Courage Investment Group Limited. (Incorporated in Bermuda with limited liability) (Hong Kong Stock Code: 1145) (Singapore Stock Code: CIN)

Transcription

1 (Incorporated in Bermuda with limited liability) (Hong Kong Stock Code: 1145) (Singapore Stock Code: CIN)

2 Contents Corporate Information 3 Management Discussion and Outlook 4 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income 12 Condensed Consolidated Statement of Financial Position 13 Condensed Consolidated Statement of Changes in Equity 15 Condensed Consolidated Statement of Cash Flows 16 Notes to the Condensed Consolidated Interim Financial Statements 18 Other Information 32

3 Abbreviations In this interim report, the following abbreviations have the following meanings unless otherwise specified: BDI Board Company Directors Group Hong Kong Listing Rules Hong Kong Stock Exchange PRC SFO SGX-ST Shareholders HK$ US$ and US cents Baltic Dry Index Board of Directors of the Company directors of the Company the Company and its subsidiaries Rules Governing the Listing of Securities on the Hong Kong Stock Exchange The Stock Exchange of Hong Kong Limited People s Republic of China Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) Singapore Exchange Securities Trading Limited shareholders of the Company Hong Kong dollars, the lawful currency of Hong Kong United States dollars and cents, the lawful currency of the United States of America % per cent. 2

4 Corporate Information BOARD OF DIRECTORS Executive Directors Mr. Sue Ka Lok (Chairman) Ms. Chan Yuk Yee Independent Non-executive Directors Mr. Ngiam Zee Moey Mr. Zhou Qijin Mr. To Yan Ming, Edmond AUDIT COMMITTEE Mr. Ngiam Zee Moey (Chairman) Mr. Zhou Qijin Mr. To Yan Ming, Edmond REMUNERATION COMMITTEE Mr. To Yan Ming, Edmond (Chairman) Mr. Ngiam Zee Moey Mr. Zhou Qijin NOMINATION COMMITTEE Mr. Zhou Qijin (Chairman) Mr. Ngiam Zee Moey Mr. To Yan Ming, Edmond Mr. Sue Ka Lok JOINT COMPANY SECRETARY Ms. Lee Pih Peng Mr. Hon Kwok Ping Lawrence TRADING OF SHARES Hong Kong Stock Exchange (Stock Code: 1145) Singapore Exchange (Stock Code: CIN) REGISTERED OFFICE Clarendon House 2 Church Street Hamilton HM 11 Bermuda PRINCIPAL PLACE OF BUSINESS Suite 1510, 15th Floor Great Eagle Centre 23 Harbour Road Wanchai Hong Kong PRINCIPAL BANKER Bank of Communications Co., Ltd., Hong Kong Branch Hang Seng Bank Limited AUDITOR Deloitte Touche Tohmatsu Certified Public Accountants PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE Conyers Corporate Services (Bermuda) Limited Clarendon House 2 Church Street Hamilton HM 11 Bermuda HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE Tricor Investor Services Limited Level 22 Hopewell Centre 183 Queen s Road East Hong Kong SINGAPORE BRANCH SHARE REGISTRAR AND TRANSFER OFFICE Unit Trust/Share Registration Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore WEBSITE The above information is updated to 25 September 2017, being the latest practicable date before printing of this interim report. 3

5 Management Discussion and Outlook BUSINESS REVIEW During the six months ended 30 June 2017, the Group continued to principally engage in the business of marine transportation services, property holding and investment, investment holding and merchandise trading. The Group achieved an 83% growth in revenue by reporting US$3,364,000 (30 June 2016: US$1,839,000) for the review period and recorded a gross profit of US$629,000 in contrast to the gross loss of US$1,173,000 incurred in the prior period. The rise of the Group s revenue was mainly due to the increase in revenue generated by the Group s merchandise trading business, as well as the first dividend of US$552,000 received from the property investment project in Singapore. The dividend received was also the main contributor to the gross profit recorded by the Group during the current period. Marine transportation services During the first half of 2017, the Group s marine transportation business generated revenue of US$845,000, which showed a decline of 49% from the prior period (30 June 2016: US$1,650,000), and recorded an operating loss of US$197,000, that represented a significant decrease of 89% from the prior period (30 June 2016: US$1,865,000). The decline of revenue that coupled with the decrease of operating loss was mainly due to the change in mode of operation of this business since February 2017 by putting the two vessels held, namely MV Zorina and MV Heroic, primarily on time chartering mode rather than on the previous voyage chartering mode. This change in mode of vessel operation greatly enhances the utilisation rate of these vessels by having them on hire on a much longer and continuous term while correspondingly the Group is in a better position to control the vessels operating costs. Under time chartering, the revenue derived from chartering the vessels is lesser from voyage chartering as the charterer will be responsible for a majority of the vessels running costs. Based on time chartering contracts on hand, it is expected that the utilisation rate of the Group s vessels will be over 90% in year Nevertheless, the outlook for market conditions of vessel chartering remains competitive and challenging as the BDI, which has a close correlation to freight rate, was volatile in the first half of During the period, BDI was at its low and below 700 points in February 2017, reached its peak and over 1,300 points in March 2017, and was hovering between 800 to 1,200 points level throughout most of the period. In view of the loss making results of this business, the Group will continue to explore various measures that can raise revenue and save costs in order to improve its results. Property holding and investment The property holding and investment business continued to deliver a profitable results of US$1,373,000 and contribute revenue of US$668,000 to the Group for the first half of The Group has leased out its investment property being an office unit in Shun Tak Centre, Sheung Wan, Hong Kong since September 2016 and generated rental income of US$116,000 for the period under review. The investment property was valued at US$7,935,000 at the period end and a revaluation gain of US$645,000 was recognised in the first half of In addition, the Group holds a 10% interest in a residential property development project in Singapore which was completed in The Group received the first distribution of profit of US$552,000 from this project in January 2017 and further distributions from this project in later time of the year are expected. During the current period, the Group disposed a subsidiary which holds a residential property in Singapore at a consideration of US$1,500,000 and recorded a gain of US$51,000 on disposal of this subsidiary. 4

6 Management Discussion and Outlook Investment holding The Group s investment holding business contributed revenue of US$142,000 (30 June 2016: US$116,000) and incurred an operating loss of US$632,000 (30 June 2016: US$81,000) in the first half of During the current period, the Group continued to invest in listed equity securities and equity-linked notes and has commenced to invest in corporate bonds for the purpose of diversifying the Group s investment portfolio and to broaden its income base. The corporate bonds acquired by the Group were issued by property and aircraft leasing companies listed on the Hong Kong Stock Exchange with yield to maturity upon acquisition of these bonds ranging from approximately 4.68% to 8.75% per annum. For the period under review, the revenue of this business comprised interest income from equity-linked notes and corporate bonds, and loss incurred represented mainly unrealised loss on listed equity securities held at the period end of US$791,000 (30 June 2016: US$228,000). At the period end, the Group s investments classified as financial assets at fair value through profit or loss ( FVTPL ) of US$2,996,000 represented a portfolio of listed equity securities held and the Group s investments classified as available-for-sale ( AFS ) investments, both current and non-current portion, totalling US$9,437,000 represented a portfolio of corporate bonds held. A summary of the Group s major investments classified as financial assets at FVTPL, together with other information, is as below: Investee company Principal activities of investee company Approximate weighting to the market/ fair value of the Group s financial assets at % of FVTPL shareholding portfolio interest Acquistion costs during the period Market value as at 30 June 2017 Unrealised gain (loss) recognised during the period ended 30 June 2017 # Investee company s financial performance # Future prospects of the investee company % % A B C = B A Larry Jewery International Company Limited (Hong Kong stock code: 8351) Jewelry and pharmaceutical business 58% 2.31% 2,400 1,745 (655) For the six months ended 30 June 2017, revenue increased by 185% to HK$207,660,000 and loss for the period attributable to owners of the investee company increased by 222% to HK$35,500,000 compared to the same period in For its jewelry business, the investee company will explore opportunities to broaden the geographic base of customers to markets outside Hong Kong and Singapore and increase its visibility across South East Asian countries. For its pharmaceutical business, the investee company shall review its sales network and customer focus and to introduce more locally made products to suit the needs of domestic market. 5

7 Management Discussion and Outlook Investee company Principal activities of investee company Approximate weighting to the market/ fair value of the Group s financial assets at % of FVTPL shareholding portfolio interest Acquistion costs during the period Market value as at 30 June 2017 Unrealised gain (loss) recognised during the period ended 30 June 2017 # Investee company s financial performance # Future prospects of the investee company % % A B C = B A China Railway Group Limited (Hong Kong stock code: 390) Infrastructure construction, survey, design and consulting services, engineering equipment and component manufacturing, property development and other businesses 20% 0.02% (45) For the six months ended 30 June 2017, revenue increased by 11% to RMB billion and profit for the period attributable to owners of the investee company increased by 41% to RMB7.707 billion compared to the same period in The investee company will continue to explore its operational potentials by implementing regional operational strategies, facilitate management upgrade by deepening the management pilot scheme, innovate in the integration solutions of production and finance, assist in the realization of project financing solutions, and revitalise the enterprise by pushing forward the reform of state-owned enterprises. 6

8 Management Discussion and Outlook Investee company Principal activities of investee company Approximate weighting to the market/ fair value of the Group s financial assets at % of FVTPL shareholding portfolio interest Acquistion costs during the period Market value as at 30 June 2017 Unrealised gain (loss) recognised during the period ended 30 June 2017 # Investee company s financial performance # Future prospects of the investee company % % A B C = B A PetroChina Company Limited (Hong Kong stock code: 857) Petroleum exploration and production business 18% negligible (117) For the six months ended 30 June 2017, revenue increased by 32% to RMB975,909 million and profit for the period attributable to owners of the investee company increased by over 22 times to RMB12,676 million compared to the same period in The investee company will enhance its analysis and assessment of the situation, grasp favourable opportunities arising from China s implementation of major strategies such as the supply-side structural reform and the Belt and Road initiative, take advantage of its strengths on integrated operation and make an overall planning in respect of its resources and markets, both within and outside the PRC. Others 4% % 3,787 2,996 (791) # Extracted from published financial information of the investee companies. 7

9 Management Discussion and Outlook A summary of the Group s major investments classified as AFS investments, together with other information, is as below: Issuer Principal activities of issuer Approximate weighting to the market/fair value of the Group s AFS investments portfolio Yield to maturity on acquisition Acquistion costs during the period Market value as at 30 June 2017 Unrealised gain (loss) recognised during the period ended 30 June 2017 % % A B C = B A China Evergrande Group Property related businesses 36% ,401 3,372 (29) Pacific Century Premium Development Limited Logan Property Holdings Company Limited China Aircraft Leasing Group Holdings Limited Property related businesses 21% ,006 2, Property related businesses 20% ,977 1,868 (109) Airline leasing 10% (7) Others N/A 13% ,229 1,191 (38) 100% 9,596 9,437 (159) Merchandise trading The Group continued its merchandise trading business which focusing on trading of consumable goods relating to infant and personal care products during the review period. The business generated revenue of US$1,709,000 (30 June 2016: US$73,000) and recorded an operating loss of US$71,000 (30 June 2016: US$359,000). The sharp rise of the revenue generated by the business was mainly due to the increase of its trading volume and the expanded range of goods traded, whilst the operating loss recorded was mainly due to the promotion expenses incurred during the current period. Subsequent to the period end, the Group has expanded its business scope to electronic components with the view to expand the revenue base and to enhance the performance of this business. Share of result of a joint venture During the first half 2017, the Group shared the loss of a joint venture amounting to US$536,000 which mainly related to the decrease in fair value of an industrial property in Shanghai, China held by the joint venture, the property is intended for leasing. The carrying value of the investment in the joint venture was US$4,305,000 at the period end (31 December 2016: US$4,733,000). 8

10 Management Discussion and Outlook Overall results As a whole, the Group s loss for the period attributable to owners of the Company substantially decreased by 68% down to US$983,000 (30 June 2016: US$3,062,000) that was mainly due to the improved results of the marine transportation and the property holding and investment businesses. Basic and diluted loss per share for the period was US0.22 cent (30 June 2016: US0.80 cent (restated)). FINANCIAL REVIEW Liquidity, financial resources and capital structure During the six months ended 30 June 2017, the Group financed its operation mainly by credit facilities provided by banks and shareholders funds. At 30 June 2017, the Group had current assets of US$10,482,000 (31 December 2016: US$10,735,000) and liquid assets comprising bank balances and cash, time deposit and investment in listed equity securities totalling US$7,230,000 (31 December 2016: US$5,689,000). The Group s current ratio, calculated based on current assets over current liabilities of US$10,052,000 (31 December 2016: US$9,749,000), was at a ratio of about 1.04 at the period end (31 December 2016: 1.10). At 30 June 2017, the increase of equity attributable to owners of the Company by 73% to US$26,476,000 (31 December 2016: US$15,303,000) was mainly due to the completion of the placing of 25,400,000 Company s new shares in January 2017 that raised net proceeds of US$12,207,000. At the period end, the Group s borrowings represented loans from banks for financing the acquisition of vessels. The bank borrowings were denominated in United States dollars, bore interest at floating rates, and secured by the relevant vessels. The following is an analysis of the Group s bank borrowings and maturity profile: 30 June December 2016 Secured bank loans 18,453 19,799 Carrying amount repayable: Repayable on demand 8,675 6,441 Within one year 1,146 More than one year, but not exceeding two years 6,087 2,691 More than two years, but not exceeding five years 3,691 6,735 More than five years 2,786 18,453 19,799 The Group s finance costs of US$382,000 for the period represented mainly interests for the above bank borrowings, finance costs decreased by 9% compared to prior period (30 June 2016: US$421,000) as there were less bank borrowings during the review period. 9

11 Management Discussion and Outlook The Group s gearing ratio, calculated on the basis of total bank borrowings of US$18,453,000 (31 December 2016: US$19,799,000) divided by total equity of US$26,476,000 (31 December 2016: US$15,303,000), was at a ratio of about 70% at the period end (31 December 2016: 129%). The Group s gearing ratio has improved after the completion of the Company s shares placement in January 2017 as mentioned below. With the amount of liquid assets on hand as well as credit facilities granted by banks, the management is of the view that the Group has sufficient financial resources to meet its ongoing operational requirement. Use of proceeds from shares placement In January 2017, the Company completed the placing of 25,400,000 new shares to independent investors at the price of HK$3.82 per share. The net proceeds from the placing amounted to US$12,207,000 and has been used as intended as general working capital of the Group and for funding of attractive business/investment opportunities. Up to 30 June 2017, a majority of the proceeds has been applied for the operation and development of the Group s investment holding and merchandise trading businesses. Share subdivision On 6 June 2017, the Board proposed to implement a share subdivision by subdividing every one existing share of the Company with par value of US$0.18 each in the share capital of the Company into three subdivided shares of the Company with par value of US$0.06 each (the Share Subdivision ). The Share Subdivision was approved by the Shareholders on 28 June 2017 and became effective on 6 July Foreign currency management The monetary assets and liabilities as well as business transactions of the Group are mainly denominated in United States dollars, Hong Kong dollars, Singapore dollars, New Taiwan dollars and Renminbi. During the period under review, the Group had not experienced any significant exposure to exchange rate fluctuations, as such, the Group had not entered into any foreign currency forward contracts, currency swaps or other financial derivatives for hedging purposes. Appropriate measures will be undertaken by the Group should exchange rate fluctuations become significant. Pledge of assets At 30 June 2017, the two vessels held by the Group, namely MV Zorina and MV Heroic, with carrying amount totalling US$14,263,000 (31 December 2016: US$14,378,000) were pledged to banks to secure the loan facilities granted to the Group. Contingent liability At 30 June 2017, the Group had no significant contingent liability (31 December 2016: nil). Capital commitment At 30 June 2017, the Group had no significant capital commitment (31 December 2016: nil). 10

12 Management Discussion and Outlook EMPLOYEES AND REMUNERATION POLICY At 30 June 2017, the Group had 12 (31 December 2016: 13) employees including directors of the Company. For the period under review, staff costs (including directors emoluments) amounted to US$294,000 (30 June 2016: US$391,000). The remuneration packages for directors and staff are normally reviewed annually and are structured by reference to prevailing market terms and individual competence, performance and experience. The Group operates a Mandatory Provident Fund Scheme for employees in Hong Kong. In addition, the Group provides other employee benefits including medical insurance, subsidised training programme as well as discretionary bonus. PROSPECTS The Board is of the view that the operating environment of the Group s marine transportation business will continue to be challenging in the near term and the management has already adopted various measures aiming to improve its financial performance. As for the Group s remaining businesses, namely, property holding and investment, investment holding and merchandise trading, the management will continue to step up its effort to improve their results and to seize attractive business/investment opportunities that can create value to the Shareholders. 11

13 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended 30 June 2017 Six months ended 30 June Notes (Unaudited) (Unaudited) Revenue 4 3,364 1,839 Cost of sales (2,735) (3,012) Gross profit (loss) 629 (1,173) Other income Other gains and losses, net 6 (59) (249) Administrative expenses (688) (1,384) Share of result of a joint venture (536) Other expense (81) Finance costs (382) (421) Loss for the period 8 (983) (3,262) Other comprehensive (expense) income: Items that will not be reclassified subsequently to profit and loss: Deficit on revaluation of leasehold land and building (164) Deferred tax credit arising on revaluation of leasehold land and building 24 (140) Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Net decrease in fair value of available-for-sale investments (159) - (51) 222 Other comprehensive (expense) income for the period (51) 82 Total comprehensive expense for the period (1,034) (3,180) Loss for the period attributable to: Owners of the Company (983) (3,062) Non-controlling interests (200) (983) (3,262) Total comprehensive expense for the period attributable to: Owners of the Company (1,034) (3,047) Non-controlling interests (133) (1,034) (3,180) Loss per share attributable to owners of the Company (US cent) 10 Basic and diluted (0.22) (0.80) (restated) 12

14 Condensed Consolidated Statement of Financial Position 30 June June December 2016 Notes (Unaudited) (Audited) Non-current assets Property, plant and equipment 11 14,268 14,428 Investment property 12 7,935 7,290 Interest in a joint venture 4,305 4,733 Available-for-sale investments 13 9, Total non-current assets 35,825 26,530 Current assets Inventories Available-for-sale investments Trade receivables Other receivables and prepayments 15 1,744 2,466 Amount due from a joint venture Financial assets at fair value through profit or loss 16 2, Time deposit Cash and cash equivalents 3,734 4,544 10,482 9,286 Asset classified as held-for-sale 1,449 Total current assets 10,482 10,735 Total assets 46,307 37,265 Current liabilities Deposits received, other payables and accruals 1,377 1,980 Borrowings - due within one year 17 8,675 7,587 10,052 9,567 Liability associated with asset classified as held-for-sale 182 Total current liabilities 10,052 9,749 13

15 Condensed Consolidated Statement of Financial Position 30 June June December 2016 Notes (Unaudited) (Audited) Capital and reserves Share capital 18 27,443 22,871 Deficits in reserves (967) (7,568) Total equity 26,476 15,303 Non-current liabilities Borrowings - due more than one year 17 9,778 12,212 Deferred tax liability 1 1 Total non-current liabilities 9,779 12,213 Total liabilities and equity 46,307 37,265 Net current assets Total assets less current liabilities 36,255 27,516 14

16 Condensed Consolidated Statement of Changes in Equity For the six months period ended 30 June 2017 Attributable to owners of the Company Property Investment Non- Share Share revaluation revaluation Other Exchange Accumulated controlling capital premium reserve reserve reserve reserve losses Sub-total interests Total At 1 January 2016 (Audited) 22,871 34,872 2,125 1,531 (28,872) 32,527 32,527 Loss for the period (3,062) (3,062) (200) (3,262) Deficit on revaluation of leasehold land and building (164) (164) (164) Deferred tax credit arising on revaluation of leasehold land and building Exchange differences arising on translation of a foreign operation Total comprehensive (expense) income for the period (140) 155 (3,062) (3,047) (133) (3,180) Non-controlling interests arising from acquisition of subsidiaries Release of deferred taxation upon transfer from property, plant and equipment to investment property At 30 June 2016 (Unaudited) 22,871 34,872 2,336 1, (31,934) 29, ,367 At 1 January 2017 (Audited) 22,871 34,872 1,531 (54) (43,917) 15,303 15,303 Loss for the period (983) (983) (983) Net decrease in fair value of available-for-sale investments (159) (159) (159) Exchange differences arising on translation of a foreign operation Total comprehensive (expense) income for the period (159) 108 (983) (1,034) (1,034) Issue of shares (Note 18(i)) 4,572 7,948 12,520 12,520 Transaction costs attributable to issue of shares (Note 18(i)) (313) (313) (313) At 30 June 2017 (Unaudited) 27,443 42,507 (159) 1, (44,900) 26,476-26,476 15

17 Condensed Consolidated Statement of Cash Flows For the six months ended 30 June 2017 Six months ended 30 June Notes (Unaudited) (Unaudited) Operating activities Loss before tax (983) (3,262) Adjustments for: Interest income (171) (88) Finance costs Gain on disposal of a subsidiary 22 (51) Depreciation of property, plant and equipment Amortisation of intangible assets 60 Net decrease in fair value of financial assets at fair value through profit or loss Increase in fair value of an investment property (645) Dividend income from an investee company 4 (552) Share of result of a joint venture 536 Operating cash flows before movements in working capital (533) (2,078) Increase in inventories (376) (41) Decrease (increase) in trade receivables 198 (179) Increase in other receivables and prepayments (1,144) (904) Increase in financial assets at fair value through profit or loss (3,142) (1,314) Decrease in deposits received, other payables and accruals (785) (1,203) Increase in amounts due to related parties 93 Cash used in operations (5,782) (5,626) Interest expense paid (382) (421) Interest income received Dividend income received from an investee company 552 Net cash used in operating activities (5,441) (5,959) 16

18 Condensed Consolidated Statement of Cash Flows For the six months ended 30 June 2017 Six months ended 30 June Notes (Unaudited) (Unaudited) Investing activities Purchase of available-for-sale investments (9,596) Repayment of loan advance to an investee company 15(i) 1,866 Proceed from disposal of a subsidiary 22 1,500 Addition to investment properties (682) Purchase of property, plant and equipment 11 (98) Acquisition of subsidiaries (772) Withdrawal of restricted bank deposits 1,259 Net cash used in investing activities (6,230) (293) Financing activities Net proceeds from issue of shares 18 12,207 Repayment of borrowings 17 (1,346) (2,271) Net cash from (used in) financing activities 10,861 (2,271) Net decrease in cash and cash equivalents (810) (8,523) Cash and cash equivalents at the beginning of the period 4,544 10,407 Effect of foreign exchange rate changes 261 Cash and cash equivalents at the end of the period 3,734 2,145 17

19 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June GENERAL The Company (Registration No ) was incorporated in Bermuda on 5 April 2005 as an exempted company with limited liability under the Companies Act 1981 of Bermuda, its registered office is at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and its principal place of business is at Suite 1510, 15th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong. The Company is primarily listed on the Main Board of the Hong Kong Stock Exchange and secondarily listed on the Main Board of the SGX-ST. The condensed consolidated financial statements are presented in US$, which is the functional currency of the Company, and all values are rounded to the nearest thousand () where appropriate as indicated. The Company is an investment holding company and the principal activities of the Group are (i) provision of marine transportation services, (ii) merchandise trading, (iii) property holding and investment, and (iv) investment holding. 2 PRINCIPAL ACCOUNTING POLICIES The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as well as the applicable disclosure requirements of Appendix 16 to the Hong Kong Listing Rules. The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments and investment property that are measured at revalued amounts or fair values. Except as described below, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2017 are the same as those followed in the preparation of the Group s annual financial statements for the year ended 31 December In the current interim period, the Group has applied, for the first time, the following amendments to International Financial Reporting Standards ( IFRSs ) that are effective for the Group s accounting periods beginning on 1 January 2017: Amendments to IAS 7 Amendments to IAS 12 Disclosure Initiative Recognition of Deferred Tax Assets for Unrealised losses The application of the new and revised IFRSs in the current interim period has had no material impact on the amounts reported and/or disclosures set out in these condensed consolidated financial statements. 18

20 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of condensed consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements made by the management in applying the Group s accounting policies and the key sources of estimation uncertainty are the same as those applied to the preparation of the Group s annual financial statements for the year ended 31 December REVENUE Six months ended 30 June (Unaudited) (Unaudited) Marine transportation service income: Vessel voyage charter 14 1,650 Vessel time charter 831 Merchandise trading income 1, Dividend income from an investee company (Note) 552 Rental income from investment property 116 Interest income from financial assets at fair value through profit or loss ( FVTPL ) Interest income from available-for-sale ( AFS ) investments 93 Dividend income from financial assets at FVTPL 37 3,364 1,839 Note: The dividend income from an investee company represents the dividend income derived from the investment in Santarli Realty Pte Ltd. ( Santarli Realty ) during the period, which was classified as AFS investments (note 13(i)). 19

21 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June SEGMENT INFORMATION The following is an analysis of the Group s revenue and results by operating segments, based on information provided to the executive directors of the Company, being the chief operating decision makers, for the purposes of resources allocation and assessment of segment performance. This is also the basis of organisation in the Group, whereby the management has chosen to organise the Group in different operating activities. During the period ended 30 June 2017, the Group commenced to invest in corporate bonds which were classified as AFS Investments in the condensed consolidated financial statements. Specifically, the Group s reportable and operating segments under IFRS 8 are as follows: 1. Marine transportation services 2. Merchandise trading 3. Property holding and investment 4. Investment holding Segment results represents the profit/loss from each segment without allocation of corporate income, corporate expenses, share of result of a joint venture and finance costs. Segment revenues and results The following is an analysis of the Group s revenue and results by reportable and operating segments: Marine transportation services Six months ended 30 June Merchandise trading Six months ended 30 June Property holding and investment Six months ended 30 June Investment holding Six months ended 30 June Total Six months ended 30 June (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Segment revenue 845 1,650 1, ,364 1,839 Segment results (197) (1,865) (71) (359) 1,373 (632) (81) 473 (2,305) Unallocated: Corporate income 26 9 Corporate expenses (564) (545) Share of result of a joint venture (536) Finance costs (382) (421) Loss for the period (983) (3,262) 20

22 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June SEGMENT INFORMATION (continued) Segment assets The following is an analysis of the Group s assets by reportable and operating segments: Marine transportation services 30 June 31 December Merchandise trading 30 June 31 December Property holding and investment 30 June 31 December Investment holding 30 June 31 December Total 30 June 31 December (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) Segment assets 14,942 15,459 1,118 2,955 13,424 16,094 12, ,917 35,153 Unallocated corporate assets 4,390 2,112 Total assets 46,307 37,265 6 OTHER GAINS AND LOSSES, NET Six months ended 30 June (Unaudited) (Unaudited) Gain on disposal of a subsidiary (Note 22) 51 Increase in fair value of an investment property 645 Net decrease in fair value of financial assets at FVTPL (791) (228) Net foreign exchange gain (loss) 36 (21) (59) (249) 7 INCOME TAX EXPENSE No provision on Hong Kong Profits Tax has been made in the financial statements as the Group have no estimated assessable profit in both periods. In the opinion of the directors of the Company, there is no taxation arising in other jurisdictions. 21

23 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June LOSS FOR THE PERIOD Loss for the period has been arrived at after (crediting) charging: Six months ended 30 June (Unaudited) (Unaudited) Interest income from banks (29) (9) Employee benefits expense (including directors emoluments): Salaries and other benefits Contributions to retirement benefits scheme 8 7 Total employee benefits expenses Marine crew expenses Depreciation of property, plant and equipment Amortisation of intangible assets 60 9 DIVIDEND No dividends were paid, declared or proposed during the interim period (six months ended 30 June 2016: nil). The directors of the Company have determined that no dividend will be paid in respect of the interim period. 10 LOSS PER SHARE The calculation of basic loss per share attributable to the owners of the Company is based on the following data: Six months ended 30 June (Unaudited) (Unaudited) Loss Loss for the period attributable to the owners of the Company (983) (3,062) 22

24 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June LOSS PER SHARE (continued) Six months ended 30 June (Unaudited) (Unaudited) Number of shares Weighted average number of ordinary shares in issue during the period (Note) 450, ,177 (restated) Note: The weighted average number of ordinary shares for the periods ended 30 June 2017 and 2016 for the purpose of calculating the basic loss per share had been adjusted to account for the effect of the Share Subdivision of the capital of the Company (note 18(ii)) which became effective on 6 July For the periods ended 30 June 2017 and 2016, diluted loss per share is the same as basic loss per share as there were no dilutive potential ordinary shares outstanding during both periods. 11 PROPERTY, PLANT AND EQUIPMENT There was no addition of property, plant and equipment during the six months ended 30 June 2017 (six months ended 30 June 2016: US$98,000). 12 INVESTMENT PROPERTY The fair value of the Group s investment property as at 30 June 2017 and 31 December 2016 had been arrived at on the basis of a valuation carried out on that date by JP Assets Consultancy Limited, an independent qualified professional valuer not connected to the Group. The fair value was determined based on direct comparison approach making reference to the recent transactions of similar properties in similar location and condition under the prevailing market conditions. In estimating the fair value of the property, the highest and best use of the property was its current use. 23

25 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June AVAILABLE-FOR-SALE INVESTMENTS Available-for-sale investments comprise: 30 June 31 December (Unaudited) (Audited) Unlisted investment, at cost: Equity securities (Note (i)) Listed investments, at fair value: Debt securities (Note (ii)) 9,437 9, Analysed as: Current portion 199 Non-current portion 9, , Notes: (i) (ii) The Group holds 10% (31 December 2016: 10%) of the ordinary share capital of Santarli Realty, a company engaged in property development business in Singapore. The directors of the Company do not consider that the Group is able to exercise significant influence over Santarli Realty as the Group does not have any board seat in Santarli Realty. The fair values of the listed debt securities were determined based on the quoted market closing prices available on the Hong Kong Stock Exchange or SGX-ST. 24

26 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June TRADE RECEIVABLES The credit period granted by the Group to certain customers of voyage charter is within 2 weeks (31 December 2016: 2 weeks) after the receipt of invoices while other customers are requested to prepay the charter-hire income in full before discharging for voyage charter. Customers of time charter are requested to prepay the charter-hire income for time charter. The Group normally allows credit period for customers of merchandise trading ranging from 30 days to 180 days. An aged analysis of the Group s trade receivables based on invoice date at the end of the reporting period is as follows: 30 June 31 December (Unaudited) (Audited) 0 to 90 days to 180 days OTHER RECEIVABLES AND PREPAYMENTS Details of other receivables and prepayments are as follows: 30 June 31 December (Unaudited) (Audited) Interest-free loan to an investee company (Note (i)) 1,866 Other receivables Prepayments Deposits (Note (ii)) ,744 2,466 25

27 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June OTHER RECEIVABLES AND PREPAYMENTS (CONTINUED) Notes: (i) On 14 September 2012, Courage Marine Overseas Ltd. ( CM Overseas ), a wholly owned subsidiary of the Company, entered into a conditional sale and purchase agreement with Santarli Corporation Pte Ltd ( Santarli Corp ), an independent third party, to purchase from Santarli Corp 100,000 shares in Santarli Realty (which constitutes 10% of the issued share capital of Santarli Realty), at a cash consideration of S$100,000 and advanced an interest-free shareholder s loans of S$5,400,000. On the same date, Santarli Holdings Pte Ltd., the holding company of Santarli Corp has executed a guarantee in favour of CM Overseas of all the liabilities due by Santarli Corp to CM Overseas. Santarli Realty is a subsidiary of Santarli Corp and is engaged in property development business in Singapore. During the year ended 31 December 2016, Santarli Realty has partially repaid the interest-free loan amounting to S$2,700,000 (equivalent to approximately US$1,946,000). During the period ended 30 June 2017, Santarli Realty has repaid the remaining interest-free loan of S$2,700,000 (equivalent to approximately US$1,866,000). (ii) At 30 June 2017, the deposit amount of US$961,000 (31 December 2016: nil) was prepaid for the purchase of inventories in relation to the Group s merchandise trading business. 16 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 30 June 31 December (Unaudited) (Audited) Held for trading, at fair value: Equity-linked notes (Note (i)) 645 Equity securities listed in Hong Kong (Note (ii)) 2,996 2, Notes: (i) (ii) At 31 December 2016, the Group held equity-linked notes with aggregate principal amount of HK$5,000,000 which bore fixed interest rate of 10.08% per annum and would be due in March 2017 (subject to early redemption). These equity-linked notes were linked with a Hong Kong listed security at a strike price. The fair value of these equity-linked notes was determined based on quoted price in over-the-counter market at the end of the reporting period. The fair values of these listed equity securities were determined based on the quoted market closing prices available on the Hong Kong Stock Exchange. 26

28 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June BORROWINGS During the six months ended 30 June 2017, the Group repaid bank loans totalling US$1,346,000 (six months ended 30 June 2016: US$2,271,000). These bank loans carry interest at London Interbank Offered Rates plus certain basis points. The outstanding bank loans at 30 June 2017 are repayable within 2 to 5 years (31 December 2016: repayable within 3 to 6 years). The borrowings as at 30 June 2017 and 31 December 2016 were secured by the followings: (i) (ii) (iii) corporate guarantee from the Company on the outstanding loan balance; first preferred mortgage over the vessels held by Zorina Navigation Corp. and Heroic Marine Corp., named MV Zorina and MV Heroic respectively; and assignment of insurance proceeds in respect of vessels MV Zorina and MV Heroic. The proceeds arising from the loans were used to finance the acquisition of vessels included in property, plant and equipment. The Group has no history of default for repayment of the borrowings. At 30 June 2017 and 31 December 2016, the Group failed to maintain the financial covenant in relation to the security coverage ratio as stipulated in two borrowing agreements with the relevant banks. The security coverage ratio is equal to the total of the market value of the vessel and the market value of any additional security over the outstanding loan balance. According to the relevant terms of the borrowing agreements, the Group should either provide cash deposit as additional security or early prepay certain portion of the outstanding loan balance amounting to US$8,675,000 (31 December 2016: US$6,441,000) as will enable the security coverage ratio be maintained at the required level. The Group has negotiated with the relevant banks in respect of the failure to maintain the security coverage ratio and the banks have neither requested the Group to provide additional security nor to early repay the borrowings up to the date of this report. In light of the above, the shortfall to maintain the security coverage ratio amounting to US$8,675,000 (31 December 2016: US$6,441,000) has been included as the Group s current liabilities and considered as repayable on demand. 27

29 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June SHARE CAPITAL Number of shares Amount 000 Authorised: 1 January 2016, 31 December 2016 and 30 June 2017 (US$0.18 per share) 1,000, ,000 Issued and fully paid: 1 January 2016 and 31 December 2016 (US$0.18 per share) 127,059 22,871 Issue of new shares (Note (i)) 25,400 4, June 2017 (US$0.18 per share) 152,459 27,443 All issued ordinary shares have a par value of US$0.18 each (31 December 2016: US$0.18 each), which carry one vote per share and carry the right to dividends as and when declared by the Company. Notes: (i) (ii) On 18 January 2017, the Company completed a placement of 25,400,000 ordinary shares under general mandate to certain independent third parties at an issue price of HK$3.82 each (the Placing ) and recognised an increase in share capital of US$4,572,000 and share premium of US$7,635,000 (after netting off US$313,000 share issue expenses). The net proceeds from the Placing were US$12,207,000. The new shares issued pursuant to the Placing rank pari passu in all respects with the then existing shares. On 6 June 2017, the Board proposed to implement a Share Subdivision by subdividing every one existing share of the Company with par value of US$0.18 each in the share capital of the Company into three subdivided shares of the Company with par value of US$0.06 each. The Share Subdivision was approved by the Shareholders on 28 June 2017 and became effective on 6 July Immediate after the Share Subdivision became effective, the authorised share capital of the Company became US$180,000,000 divided into 3,000,000,000 subdivided shares of par value of US$0.06 each, of which approximately 457,377,000 subdivided shares were in issue and were credited as fully paid. 19 PLEDGE OF ASSETS At the end of the reporting period, the Group pledged the following assets to banks as security for the loan facilities granted to the Group: 30 June 31 December (Unaudited) (Audited) Property, plant and equipment 14,263 14,378 28

30 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June RELATED PARTY DISCLOSURES Details of transactions between the Group and other related parties are disclosed below. (a) During the period ended 30 June 2017, the Group has the following transaction with a related party that is not a member of the Group: Six months ended 30 June Related party Nature of transaction (Unaudited) (Unaudited) Poly Investment & Finance Rental expense (Note) Limited ( PIF ) 35 Note: The amount represents rental expense paid to PIF in which Mr. Suen Cho Hung, Paul (a substantial shareholder of the Company) is the controlling shareholder and Mr. Sue Ka Lok is a director of both the Company and PIF. (b) Remuneration of key management personnel The remuneration of directors who are also identified as members of key management during the periods was as follows: Six months ended 30 June (Unaudited) (Unaudited) Short-term benefits Post-employment benefits

31 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS Fair value of the Group s financial assets that are measured at fair value on a recurring basis Some of the Group s financial assets are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets are determined (in particular, the valuation techniques and inputs used), as well as the level of the fair value hierarchy into which the fair value measurements are categorised (levels 1 to 3) based on the degree to which the inputs to the fair value measurements is observable. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Financial assets Fair value as at 30 June 31 December (Unaudited) (Audited) Fair value hierarchy Valuation techniques and key inputs Significant unobservable inputs Relationship of unobservable inputs to fair value AFS investments Listed debt securities 9,437 Level 1 Quoted prices in active markets N/A N/A Financial assets of FVTPL Listed equity securities 2,996 Level 1 Quoted prices in an active market N/A N/A Unlisted debt securities 645 Level 2 Quoted prices in an overthe-counter market N/A N/A 30

32 Notes to the Condensed Consolidated Interim Financial Statements For the six months ended 30 June DISPOSAL OF A SUBSIDIARY On 26 June 2017, CM Overseas entered into a sale and purchase agreement with an independent third party to dispose of the entire shareholding interest in, and the shareholder s loan to a wholly owned subsidiary (the disposed company ) of CM Overseas at a cash consideration of US$1,500,000. At the time of the disposal, the major asset of the disposed company was an investment property located in Singapore, which was classified as asset classified as held-for-sale as at 31 December The gain on disposal of a subsidiary was US$51,000 and the disposal was completed on 26 June The net asset of the disposed company at the date of disposal was as follows: (Unaudited) Investment property 1,449 Cash consideration received 1,500 Net asset disposed of (1,449) Gain on disposal of a subsidiary 51 Cash inflow from disposal of a subsidiary: Cash consideration received 1, EVENT AFTER THE REPORTING PERIOD Save for the Share Subdivision as mentioned in note 18(ii), there was no other material event after the reporting period. 24 APPROVAL OF UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR ISSUE The unaudited condensed consolidated interim financial statements for the six months ended 30 June 2017 are authorised for issue by the Board on 29 August